Could quantum computing destabilize Canada’s P&C sector?

Quantum computing holds promise for dozens of industries, including property and casualty (P&C) insurance.

But there are also downsides to the technology. For one, quantum computers are not yet that stable and must operate in extremely controlled environments. It’s not far-fetched to think about AI starting to rewrite its own programming and cutting humans out of the loop.

Here’s one example: a military AI drone goes rogue and tries to destroy a human operator who is preventing the drone from hitting its target. When the human tries to alter the drone’s AI code, the drone destroys a communications tower that the human is using to communicate with the drone in a last-ditch effort to keep its mission alive.

This scenario was originally reported as an actual U.S. Air Force simulation. A colonel later said he misspoke, and the scenario was a hypothetical ‘thought experiment’ meant to be anecdotal. Still, the example illustrates potential real-world challenges posed by AI-powered technology, the U.S. Air Force concedes.

“That’s an example of AI not having sufficient parameters to defend the user,” says George Beattie, head of innovation at CFC Underwriting.

Criminal opportunities

Cryptography is also a major concern, because quantum computers could pose a security threat by potentially breaking many of the current encryption methods, says Biren Agnihotri, leader of emerging technologies and AI & data with EY Canada.

This could lead to an ‘arms race’ scenario, in which potential bad actors — including superstates or nation-states — try to gain the upper hand on rivals by infiltrating and taking over their perceived enemy’s quantum operations. Imagine the technology trickling down to criminal gangs, particularly in regions where there’s a close alignment between the state and the criminal underworld.

“I think there’s some evidence criminal gangs have been obtaining lots of encrypted information, saving it for a time when they’ll be able to deploy quantum standards against it and break it open,” Beattie says. “Although quantum computing will probably become the tool of criminal actors or bad actors, it’ll also be a tool of those that protect companies — just like certain security tools today can be manipulated by bad actors, but are also defences against them.”

Well into the future, ‘quantum hacking for hire’ may become a security threat, Beattie suggests. For example, a nation-state may establish a ‘quantum computing server farm,’ allowing criminals to pay a fee for help to break into encrypted materials.

Cost impedes access

Quantum computing comes with the usual costs associated with state-of-the-art technology. Building and maintaining quantum computers is very expensive, making them inaccessible for many organizations.

Related: What quantum computing could mean for insurance

“In terms of implementation, it is expected that any undertaking of quantum computing across the [P&C] industry will be asymmetrical given the potential costs, and that larger institutions may be able to begin making use of this technology sooner than smaller institutions,” the Office of the Superintendent of Financial Institutions tells CU.

The ultimate question is whether the benefits will outweigh the risks. “The people that crack quantum will be equally haunted,” Beattie says. “We can see the direction it could go if everything goes well. But we can’t trust there won’t be bad actors around the world that will manipulate it.”

This article is excerpted from one appearing in the February-March 2024 print edition of Canadian Underwriter. Feature image courtesy of iStock.com/gremlin